Investors say ex-UGA coach promised huge returns

Article by: KATE BRUMBACK

Associated Press

May 9, 2014 - 4:35 PM

ATHENS, Ga. — Several investors testified Friday that the former University of Georgia football coach on trial on fraud charges assured them the financial opportunity he was pitching carried virtually no risk and would bring tremendous returns.

The investors testified Friday in federal court in Athens that their relationship with Jim Donnan and their trust in him prompted them to invest. They all lost sums of money ranging from tens of thousands of dollars to more than a million. For some, the loss was frustrating and disappointing but didn't really hurt them too much financially, while others said they felt the loss deeply.

A federal indictment against Donnan and Gregory Crabtree, of Proctorville, Ohio, says the pair ran a fraudulent investment scheme from September 2007 to December 2010 through GLC, a West Virginia-based company that dealt in wholesale and closeout merchandise. Prosecutors say the company raised more than $80 million from 94 investors between September 2007 and December 2010, and nearly $23 million of that was lost.

Donnan is on trial for charges including conspiracy, mail fraud and wire fraud. Crabtree pleaded guilty to a single conspiracy charge last month and faces up to five years in prison.

Prosecutors have said Donnan's lengthy coaching career made him a popular man with extensive personal and professional networks that he mined to lure investors into a fraudulent scheme. After investing, many initially saw significant returns, which prompted many to invest again.

The prosecution has argued Donnan falsely told investors that they were putting their money in "presold deals" — merchandise they would purchase for which Crabtree already had a committed buyer — when in fact they were buying merchandise and then looking to sell it. Investors discovered warehouses full of unsold inventory after the company fell apart.

One after the other, people testified that their main reasons for investing were: their trust in Donnan; the appearance of virtually no risk because the "deals" were presented as having been presold; and the promise of huge returns.

Valerie Fennell, of Athens, said her doctor husband invested $450,000 in the year before his death in May 2011 and ended up losing $405,000.

"That was our retirement, so when my husband passed, that left me in financial difficulty," she said.

Edd Price, a real estate developer in Braselton, said he lost about $1.1 million. He said Donnan was very convincing when he talked about the investment opportunity.

"He was totally sold on it," Price said.

Mike Cheek, a retired businessman who lives in Jacksonville, Florida, said he and a couple of others gave Donnan advice in early 2010 to "professionalize" the company to help bring outside money in rather than just relying on money from friends. They drew up suggestions, including: implementing checks and balances, separating GLC funds from Crabtree's other money, setting up a board of advisers, and hiring administrative support personnel.

"We thought this thing could be taken to a substantially larger level as a company," he said.

He was shocked later that year, after the company had crumbled, to find that Crabtree had warehouses full of inventory and that the company had not been operating the way he'd been led to believe.

Despite the huge losses, several witnesses said they still consider Donnan a close friend. UGA swimming coach Jack Bauerle invested $100,000 and didn't get any returns from GLC, but he said he and Donnan are closer than ever.

"I trust Jim totally," he said. "I thought he had my best interest in mind."